Building a Comprehensive Third-Party Risk Management Program: A Step-by-Step Guide

In today’s interconnected business landscape, organizations increasingly rely on third-party vendors to enhance their capabilities and expand their reach. While partnering with vendors offers numerous benefits, it also exposes businesses to various risks that must be diligently managed. To protect sensitive data, preserve business continuity, and safeguard reputation, it’s crucial to establish a standardized and automated onboarding process for vendors. In this blog post, we will guide you through the essential steps to create a robust Third-Party Risk Management (TPRM) program.

Step 1: Create a Standardized, Automated Onboarding Process

The foundation of an effective TPRM program lies in a well-defined and automated onboarding process. From the initial vendor request and prescreening to collecting required documentation such as insurance and certifications, following a standardized onboarding process ensures that critical requirements are not overlooked, and both parties are well-prepared to collaborate.

Utilize software to streamline and standardize the workflow, ensuring a consistent onboarding experience for all vendors. This process also benefits from a central repository of vendors within the software platform, enabling real-time tracking of onboarding progress. Additionally, consider integrating a simple online form to facilitate new vendor requests, with automated notifications that trigger the onboarding workflow.

Step 2: Create Vendor Profiles

Building a risk profile for each vendor is the next crucial step in your TPRM journey. A risk profile helps define the relationship with each vendor, understand the products or services they provide, and determine their importance to your organization. This profile also dictates the level of physical, systems, and data access granted to the vendor.

Categorizing vendors through risk profiling promotes consistency in vetting and enables a deeper understanding of your overall vendor population. Furthermore, it determines the specific questionnaires required to complete the vendor risk profile. Tailor your questionnaires according to the vendor’s unique risks and offerings; for instance, a cloud provider may necessitate questions about data security, while an office cleaning company may not.

Step 3: Employ Risk & Controls Assessments

Once you have assessed the risks associated with each vendor, it’s vital to evaluate the controls they have in place to manage those risks effectively. Avoid reinventing the wheel by aligning with industry best-practice control frameworks, such as NIST, ISO, or CSA, to support your assessment process.

These assessments provide a comprehensive understanding of the risks and controls in place, helping you make informed decisions about vendor partnerships.

Step 4: Develop a Remediation Management Plan

During the onboarding process, it’s not uncommon to identify issues or gaps that require remediation. A well-prepared remediation management plan ensures that issues are addressed promptly, preventing delays in the onboarding process.

Employ an efficient system, like ThirdPartyBond, to facilitate the remediation process with these four steps:

  1. Record the issue or use automated software to create an issue log.
  2. Outline action items for follow-up measures.
  3. Send recurring action reminders to the relevant stakeholders.
  4. Remediate and retest the identified issues.

Leveraging rules-based automation ensures that all action items are completed before closing issues, streamlining the remediation process.

Step 5: Regularly Review Contracts

Effective TPRM involves continuous monitoring of vendor performance. Regularly review contracts to assess vendor compliance, measure performance against Key Performance Indicators (KPIs), and stay ahead of renewals or expirations.

Automated technology can streamline contract management and provide real-time data for assessing vendor risk related to performance.

Step 6: Mandate Ongoing Vendor Monitoring

TPRM is an ongoing process that requires continuous monitoring of vendor activities. Use various methods to ensure ongoing monitoring, such as:

  1. Automating follow-up assessments based on risk levels.
  2. Triggering assessments through rule-based automation when specific thresholds are breached or related events are discovered.
  3. Integrating third-party intelligence feeds to receive real-time monitoring alerts for changes in vendor risk ratings, adverse media appearances, government watch list inclusion, or public record filings.

Step 7: Define a Vendor Offboarding Process

Just as the onboarding process is crucial, a well-defined vendor offboarding process is equally essential. Terminate vendor relationships in a structured manner that includes finalizing payments, disabling data access, and more.

Leverage your software platform to partially or fully automate the offboarding process, ensuring that no crucial steps are missed and risks are mitigated during the separation.

Creating a robust Third-Party Risk Management program requires a systematic and well-structured approach. By implementing a standardized and automated onboarding process, developing risk profiles, conducting risk assessments, and implementing a remediation management plan, organizations can better safeguard themselves from potential risks associated with third-party partnerships. Regularly reviewing contracts, mandating ongoing vendor monitoring, and establishing an effective offboarding process will further strengthen the TPRM program. Taking these measures will not only protect sensitive data and ensure business continuity but also foster strong and secure relationships with third-party vendors.

Are you ready to take control of your third-party risks and secure your organization’s future? Join the ranks of successful businesses benefiting from Connected Risk Third-Party Risk Management.

Take the first step today – Request a demo and embark on a risk management journey that puts you in charge. Connect with our experts and discover how Connected Risk can transform your risk management landscape. Together, let’s build a secure and resilient future for your business!

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